4 projects that can benefit from an SBA 504 Loan

Post by Jennifer Sabourin | Vice President, Business Development

Many projects that involve commercial real estate for your business can benefit from an SBA 504 loan.  Here are four example projects for which a business owner may utilize an SBA 504 Loan.

What is an SBA 504 Loan?

Read: An Overview of the SBA’s 504 Loan Program

Purchasing commercial real estate for your business

Let’s say you are purchasing a functioning laundromat that is the main tenant in a strip mall, for example. The seller is selling the strip mall and the laundromat as a package. An SBA 504 loan can be used for the real estate portion of the purchase. Combined with a conventional loan from a lender, the total acquisition can be financed.

 

New real estate construction for your business

Consider the following scenario: an experience car wash owner has identified a great location for his next car wash. She wishes to purchase the empty lot and build a new express car from the ground up. This significant undertaking is one of the ideal situations for which the business owner should consider an SBA 504 loan. The longer payment terms and lower interest rates offered by the SBA 504 program can give the owner the additional bandwidth in which to erect the new facility and get the car wash operational.

 

Adding renewable energy to your commercial real estate project

With energy costs soaring, adding renewable sources of power is increasingly attractive to business owners. Adding solar panels or geothermal installations to the business-occupied building is one way of reducing energy costs. An SBA 504 loan may be used towards adding solar panels to commercial real estate as part of the SBA’s public policy goal.

One additional benefit of an SBA 504 loan for adding such renewable energy projects is that it could increase the limit on your SBA 504 Loan. Typically at least 15% of the property’s power must come from the renewable source to quality. Visit the SBA website for more information on this benefit.

Business improvement that includes real estate renovation or expansion

For just about every business, improvement through renovations or upgrades to facilities is a consideration at some point. An SBA 504 loan can be used to fund a renovation or even an expansion of the business’s real estate facility. A commercial laundry facility, for example, may be looking to expand its building to add more machines or sorting area to handle more pickup and drop-off business. (Pickup and drop-off is a growing segment of the laundry industry.) The work to be done to build out more space and can be financed with an SBA 504 loan.

 

Visit the SBA website for more information on SBA 504 Loans: https://www.sba.gov/funding-programs/loans/504-loans